On-Money

Despite a reduced global growth forecast of 2.7% and slackening demand in commodities such as oil,  metals and agriculture, the developing world particularly China still has growing demand. The recession should be seen as cyclical with underlying growth reduced and continuing into 2009 but structural demand is still present albeit somewhat quiescent at present.

In the last five years 30% of crude oil demand growth and 60% of copper demand growth has come from just one country: China. Compared to the USA in the same period, where demand has been declining in copper and almost unchanged in crude oil.  Inflationary pressures had begun to tell on China so their easing off fir a short time offers some respite.

Reduced oil prices down from the peak of $140/barrel in July 08 are also reducing the incentive to find new supplies or bring more expensive oil supplies online.  However demand will not stay depressed forever and there will be a long term need to increase oil supply.

Popularity: 76% [?]

Deeper U.S. Recession Will be exported to the World. The US credit crunch is going global and the US recession could become severe despite the promised benefits of the just-enacted TARP. Indeed, the recession now threatens to go global, with industrial economies on the brink of recession and both trade and financial shocks threatening the developing world. These shocks will help lower inflation and give officials the ability to respond with easier monetary and other policies.

It’s likely the US GDP will contract by 1% or more in the next nine months and the jobless rate will exceed 7%. The freeze in financial markets is getting worse and implementation of TARP is at least a few weeks away.

Global growth is now forecasted to be 2.7% in 2009, down 0.8% from a few weeks ago. Mainly because of trade and financial shocks, technical recessions have hit many industrial economies. Growth in exports is slowing and there is a risk of a downturn in capital spending.

Inflation is less of a bugbear as growth slows and inflationary heat diminishes. This slowing down varies from country to country however. a global slowdown is now forecast. But just how severe and for how long? No one knows and forecasts of interest rates curves have got steeper helping the dollar but this may not last.

Popularity: 78% [?]